Old Problems, New Solutions: Estate Planning for Non-Traditional Families. Part 1-An Introduction to Estate Planning for Non-Traditional Families

Over the past forty years, the number of traditional “nuclear families” (defined as a mother, father and children) has declined from approximately 40% of the total households in 1970 to 20% in 2010. Changing lifestyles, economic conditions and growing acceptance of non-traditional family arrangements factor into this change which has dramatically shifted how adults cohabitate and how children are raised.

This change also requires a different approach to estate planning from the typical planning used by a nuclear family. Over the next week, we will discuss a variety of planning issues faced by non-traditional families including specific issues related to blended families (families created from one or more previous marriages). In addition, we will discuss how non-traditional families can utilize a wide variety of tools to deal with the complications related to their estate planning.

“Non-traditional families” encompass a group of family arrangements that vary in one way or another from the traditional family. They include:

1) Single Parents-This includes parents who have divorced their former spouse and are raising children on their own, parents who have adopted children or parents who do not have or never had a relationship with the child’s other biological parent.

2) Co-parenting Arrangements-Traditionally, these arrangements have been used by divorced couples to ensure that their children received support from both parents. More recently, individuals wishing to become parents without cohabitation, marriage or a romantic relationship have begun using this type of arrangement. Co-parents may be friends or may be introduced through professional matching services.

3) Blended Families-As mentioned above, a blended family is created when one or more divorced individuals remarry and incorporate their existing children into one family unit. Complications can arise if there are children born outside this relationship and children born of both new spouses.

4) Non-married families-Some individuals begins families with their partners without marrying. For some, such as LGBT individuals, it may not be legally possible to marry. For others, it may be a conscious choice to remain unmarried even though their relationship may be long-term and the partners may have children together.

5) Same-sex married couples-New York, the District of Columbia and seven other states currently allow same-sex couples to marry. Despite the rights granted to these families at the state level, the Federal Defense of Marriage Act (DOMA) complicates and limits the rights granted to these individuals and their families.

While progress has been made towards providing the same or similar rights to non-traditional families, the traditional estate planning benefits granted to a traditional nuclear family do not extend to a non-traditional family. Consequently, non-traditional families must be aware of the following issues related to their estate plans:

1) Guardianship of minor children-Ensuring that a child is cared for by the right people after a parent dies is one of main reasons individuals create an estate plan. For single parents, the lack of a second parent makes this issue of the utmost importance. For non-biological parents or co-parents, it is also essential that proper documentation be in place to allow a surviving parent to remain the legal guardian of a minor child.

2) Inheritance rights-The New York intestacy statute governs the order in which property passes if an individual has no will. Families that include non-biological relatives, non-married partners and, depending on the state, same-sex spouses are not ensured any inheritance rights under this statute. A last will and testament or a comparable testamentary instrument (such as a revocable trust) is necessary if you wish to pass property to these relatives, partners and spouses.

3) Taxes-Married individuals receive numerous tax benefits that non-married individuals and same-sex spouses do not receive. For gift tax purposes, a married heterosexual couple can transfer unlimited assets between spouses during their lifetime. Due to DOMA, this benefit is not available to same-sex married couples.

The estate tax benefits for heterosexual married couples are similarly skewed. In addition to their own personal estate tax exemption, married couples may pass unlimited assets to each other at death using a marital deduction. This is unavailable to non-married partners and co-parents. Same-sex married couples may utilize the marital deduction for New York estate tax purposes, but it is unavailable for federal estate tax, again due to DOMA.

4) Medical and financial decisions during incapacity or disability-Married couples in New York (both opposite sex and same-sex) have the ability to make medical and financial decisions for their spouses if they become incapacitated or disabled. For non-married families, these rights are granted to the disabled or incapacitated individual’s biological family rather than any partner.

The complications in planning an estate for a non-traditional family are numerous, but they are not insurmountable. In the next post, I will discuss some specific issues and solutions that related to blended families.

For more information on estate planning for non-traditional families, please contact info@levyestatelaw.com.